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Subject: Potential Energy and Climate Change Policy Implications of a Trump Administration
The following is a compilation of energy and climate change policy positions that President-elect Trump articulated both during and shortly after the campaign. These positions were pulled from a variety of sources, including campaign position papers, speeches, and interviews. Our goal in compiling this list is to bring together in one place what the President-elect has communicated around these topics in order to provide structure to the discussion of the drivers that might shape policy and what the eventual energy and climate change policies in a Trump administration might look like. We want to emphasize that the positions and statements listed below are not necessarily our views nor are they necessarily our recommendations.
Vision: Both during and after the campaign President-elect Trump articulated that he wants to pursue American energy dominance as a strategic, economic and foreign policy priority in order to become and stay independent of any need to import energy from the OPEC cartel or any nations that are, in his view, hostile to American interests. The second part of this vision is to leverage the ability of the United States to produce low cost energy to improve the national trade balance by expanding exports. Implicit in both parts of this vision is an acceptance of the view that the US has the necessary amount of energy, be it coal, oil, gas or renewables to more than satisfy its needs, and to do so at a competitive price.
o Supply: Based on past statements by Mr. Trump, we believe this vision will primarily translate into a Drill, Baby, Drill, oil and gas strategy, which could result in a substantial expansion of the current drilling footprint. However, this is not to say that there will be no place for renewables in a Trump energy policy. Rather, it seems that while such technology may not be as favored with federal regulatory or financial support as has been the case in recent years, it will not be actively excluded from the energy strategy as long as its market competitive. Though not explicitly stated as such, it does appear that the Trump energy policy will be, at its core, rather Darwinian in that whatever technology or fuel can deliver energy at a market competitive rate will be favored. So, if, for example, solar or wind can deliver power at an unsubsidized life cycle cost that is competitive with the cost of coal or gas based power then it will be viewed favorably.
§ President-elect Trump has indicated that he believes he can make America energy independent by taking advantage of the ongoing shale oil and shale gas revolution, and by resurrecting the coal mining industry by removing regulatory burdens on both coal mining and coal burn power generation that he believes to be excessive.
§ He plans to expand onshore and offshore leasing on federal lands by increasing the amount of acreage available for lease, and by reducing the number of regulatory and institutional restrictions. Specific focus areas mentioned during the campaign, include:
§ Encouraging the leasing of potential shale oil and gas resources for exploration and exploitation, especially in the western USA. Now clearly, not all of this acreage is prospective for shale oil and gas activity. In fact, only a small fraction is potentially viable. That said, with current use restrictions, it is relatively difficult to pursue any wells, shale or otherwise that employ horizontal, multistage fracing.
§ Allowing exploration and development on the Southeastern Outer Continental Shelf (OCS). This acreage has only been lightly explored and none of it has been developed. Candidate Trump conveyed the impression that he intends to change that.
§ Though candidate Trump repeatedly communicated his support of fracking, he did introduce some confusion as to how firm this support might be. At the end of July in Denver during a TV interview, he stated that he supported local (meaning municipal) control of fracking, up to and including banning the practice, which is not the position of most of the oil and gas industry. However, Harold Hamm, CEO of Continental Resources, and Mr. Trump’s energy advisor, indicated later that Mr. Trump likely did not fully understand the question or the implications of his answer, so probably didn’t really mean it. That said, Mr. Trump has not publically repudiated the local control statement, so it is an unknown.
o Demand: Mr. Trump’s primary consideration here appears to be to provide energy to the market that is low cost relative to that used by international competition. His campaign position papers suggest he apparently believes this goal can be accomplished without compromising clean air or water via the technology revolution previously referenced, and through reduced regulatory burdens.
§ He has indicated that he intends to support economic growth by accelerating infrastructure build out to take product from the oil and gas fields to markets. Examples include:
§ The Keystone pipeline, where Trans Canada has already announced plans to renew its permit application. A Trump administration is likely to approve the application and support the subsequent construction.
§ A Trump administration will likely move forward on the currently stalled Dakota Access Pipeline.
Based on Mr.Trump's campaign comments and position papers, I would expect it
likely his administration will encourage (demand?) state and federal regulators
to expedite reviews for both intrastate and interstate infrastructure projects,
such as natural gas pipelines, in order to speed product to market, and to lower
end user costs. One such example of the type of infrastructure efforts
where federal intervention might make a difference includes the construction of
pipelines from the shale gas fields of Pennsylvania to markets in New England.
o Exports: President elect Trump's energy position explicitly states that he intends to grow energy exports. Though the position statement does not specify as a goal an increase in oil and natural gas exports, given the totality of campaign comments and position statements this is what is most likely intended.
§ Natural gas exports have been growing since the middle of the last decade through a combination of growing pipeline exports (mainly to Mexico), and more recently, the construction of LNG export facilities. The federal government's ability to encourage more exports would probably be best achieved through tax policy and expedited, narrower regulatory reviews of export related infrastructure, such as pipelines and LNG facilities.
§ Crude oil exports are already increasing due to the repeal at the end of 2015 of laws that prevented most US produced oil from being exported. As shale oil costs continue to decline, and well productivity continues to grow, costs per barrel will likely fall, meaning the ability of US firms to competitively market crude could continue to grow.
o Regulatory: Team Trump priorities here appear to be threefold: 1) Stop the slow motion, regulatory assault (their perspective) being directed against the oil and gas, and coal industries. Harold Hamm call this a death by a thousand cuts; 2) Stop the government from being distracted (again, their perspective) by climate change initiatives; 3) Get the government out of the business of picking winners and losers(their view), such as solar/wind over oil/coal, and let the market decide. Specific actions mentioned during the campaign, include:
§ Shifting the attention of the Environmental Protection Agency (EPA) away from climate change regulation and mitigation, and refocusing the Agency on its core mission of ensuring clean air and safe drinking water.
§ Dismantling the Climate Action Plan. CAP is a broad set of executive actions that impact a wide range of US industries, including power, transportation, energy, construction and renewables. Central to the CAP is the EPA Clean Power Plan, which is perceived by many Trump supporters as being responsible, at least in part, for the decimation of the US coal industry. Candidate Trump has made it clear that in a Trump administration EPA this initiative will be shelved.
§ Eliminating the "Waters of the US" set of rules put forth by the EPA and the Corp of Engineers. Mr. Trump apparently views WOTUS as overly broad and punitive, and a clear example of the EPA reaching beyond its legal mandate.
§ Though Mr. Trump did not specifically address Corporate Average Fuel Economy (CAFÉ) regulations and EV tax credits, there is a general expectation, given the general tenor of his energy/EPA comments, that CAFÉ standards are going to be relaxed significantly, and that EV tax credits will not be extended, and that existing authorizations could be reduced either in number or in amount.
§ To operationalize the above, the new administration will seek to replace Gina McCarthy, the current head of the EPA, as soon as possible. Myron Ebell is a leading candidate. Mr. Ebell has been named head of Mr. Trump’s EPA transition team, and is currently head of the Competitive Enterprise Institute. He recently noted, with apparent approval, that candidate Trump has consistently called for increased fossil fuel development and a diminishment of the Obama administration's climate change policies.
§ Suspending or eliminating the "stream rules". These rules, being put forth by the Interior Department's Office of Surface Mining Reclamation and Enforcement (OSMRE), have been hi-lighted by the Trump campaign as a prime example of the "war on coal" being waged by the Obama administration.
§ Stop pursuing tighter federal methane emission standards for the US onshore oil and gas industry.
§ Suspending efforts by the U.S. Bureau of Land Management to establish rules over fracking on federal and tribal lands.
o Climate Change: Reports indicate that during the campaign, candidate Trump stated that he would cut all federal climate change spending—a sum his campaign said would total $100 billion over the next 8 years, covering both domestic and international climate change programs. Specifics include:
§ Not contributing to the International Climate Change fund and related Green Climate Fund. This is currently projected to amount to 2-3 billion dollars a year.
§ Cutting domestic, direct federal spending to address global climate change. It is estimated this totaled about $77 billion from FY 2008 through FY 2013, and that 75 percent of that amount was for technology development and deployment, mostly through the Department of Energy.
§ For FY 2014, approximately $11.6 billion was appropriated for these domestic programs. This breaks down to about 68 percent for energy technology, 23 percent for science, 8 percent for international assistance and 1 percent for adaptation to climate change.
§ As a candidate, Mr. Trump repeatedly expressed skepticism regarding the wisdom of pursuing implementation of the Paris climate agreement, which has not been ratified by the US Senate. It has recently been reported that he is seeking ways to exit from the agreement as quickly as possible. However, and as noted above, candidate Trump has already committed to not following through with the financial component of the agreement, i.e. not funding either the International Climate Change fund or the Green Climate Fund.
§ Based on candidate Trump’s statements regarding the Keystone pipeline, a Trump administration is likely to pursue a policy of more generally encouraging more oil and gas imports from Canada to the US, compared to the present administration’s opposition to such trade.
§ Potentially reinstitute some form of Iranian oil sanctions.
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